Question 5, P6-31 (similar to) Part 1 of 10 HW Score: 55%, 22 of 40 points ○ Points: 0 of 5 Save Bond valuation and yield to maturity Personal Finance Problem Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 7.90%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.317% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon interest rate of 8.90% paid annually. a. Calculate the selling price for each of the bonds. b. Mark has $20,000 to invest. If he wants to invest only in bonds issued by Crabbe Waste Disposal, how many of those bonds could he buy? What if he wants to invest only in bonds issued by Malfoy Enterprises? c. What is the total interest income that Mark could earn each year if he invested only in Crabbe bonds? How much interest would he earn each year if he invested only in Malfoy bonds? d. Assume that Mark will reinvest all the interest he receives as it is paid and that his rate of return on the reinvested interest will be 9%. Calculate the total dollars that Mark will accumulate over 5 years if he invests in Crabbe bonds or Malfoy bonds. Your total calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments he receives. e. The bonds issued by Crabbe and Malfoy might appear to be equally good investments because they offer the same yield to maturity of 7.90%. Notice, however, that your answers to part d are not the same for each bond, suggesting that one bond is a better investment than the other. Why is that the case? a. The selling price for the Crabbe Waste Disposal bond is $. (Round to the nearest cent.)

Yield to maturity Peter, an intern at Elite Investments, is asked by his supervisor to perform simple analysis of bonds in the bond market. He wants to calculate the theoretical values of the following bonds. Using the information provided below, calculate the intrinsic value of each $1,000-par-value bond The value of bond A is S Bond A B (Round to two decimal places.) Coupon rate 6% 8 Coupon frequency semiannually annually Time to maturity 5 years 9 Yield to maturity 6% 7

. The following bond was quoted in The Wall Street Journal:Bonds:     Curr.yld.:      Vol:        Close:         Net chg:CVS             7.3            10          80.875         + 1.2Five bonds were purchased yesterday, and 5 bonds were purchased today. How much more did thefive bonds cost today? (Round your answer to the nearest cent.)Increased cost $

Solve the problem. Calculate the annual interest for a $10,000 Treasury bond with a current yield of 4.4% that is quoted at 116.6 points. $396.00 $352.00 $513.04 $615.65 QUESTION 16 Solve the problem. Calculate the annual interest for a $10,000 Treasury bond with a current yield of 3.6% that is quoted at 108 points. $324.00 $466.56 $288.00 $388.80 QUESTION 17 Solve the problem. Calculate the annual interest for a $1000 Treasury bond with a current yield of 4.6% that is quoted at 108 points. $59.62 $36.80 $49.68 $41.40

quiz 11

Task 3: CMBS (1) Why are bond rating agencies so vital in the MBS market? (2) Consider a $100 million loan pool, packaged, and sold in securities of $1,000 each. The loans in the pool have five years to run, a 9% interest rate, they are fully amortizing, and there is no prepayment or default. The loan servicing charge is 1.5% of the loan balance outstanding. a. If you want to offer a security at a yield of 10.5%, what is the price of the security? 6. for correct cash flows, 1 for correct price) b. What discount does that represent to the face value of the security? e, (3) A mortgage pool has $1 billion in par value. The senior (A) tranche has 30% credit support (subordination). The next tranche (B) has 25% credit support (subordination). a. How much par value (principal) was issued in the A tranche?? b. How much par value (principal) was issued in the B tranche? 1

quiz 4

Please show full work and do not use Excel or Financial Calculator (The Lo Sun Corporation offers a 6% bond with a current market price of $875.05. The yield to maturity is 7.34%. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures? A. 16 years B. 18 years C. 24 years D. 30 years E. 32 years

K (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 12-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $925, and the market's required yield to maturity on a comparable-risk bond is 14 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)